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Sub-Saharan Africa / Democratic Republic of Congo

The state of play: FDI in the DRC

A host of problems serve as barriers to FDI into the Democratic Republic of Congo, but its untapped mineral resources have the potential to bring much-needed economic relief.

drc-fdi-mining
The Democratic Republic of Congo’s gold mining potential is rich, but the industry remains highly underdeveloped. Foreign investors are aware of the country’s potential but face numerous barriers to entry. (Photo by John Wessels/AFP via Getty Images)

The Democratic Republic of Congo (DRC) is the largest as well as one of the poorest countries in sub-Saharan Africa. In 2018, 72% of the country’s 86.97 million people were living in extreme poverty on less than $1.90 a day, according to the World Bank.

While the country’s poverty rate has fallen slightly over the past two decades, particularly in rural areas, the DRC remains one of the poorest countries in the world. According to World Bank data, GDP growth plummeted in the late 1980s, reaching a low of -13.5% in 1993, but has since increased overall until it peaked in 2018 at 5.8%.

Political instability since the 1990s has hampered the country’s economic growth. Indeed, the peak in GDP may reflect the events of December 2018, when long-time president Joseph Kabila was succeeded by Antoine Tshisekedi Tshilombo after 18 years in power. The GDP growth rate in 2020 stands at -2.2%, reflecting the wider global economic situation caused by the Covid-19 crisis, but World Bank projections show a rally to 3.5% in 2021.

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Will natural resources bring FDI to the DRC?

The DRC benefits from natural mineral resources, driving a mining sector that has historically attracted the country’s highest levels of FDI. Energy (particularly hydroelectric), infrastructure and telecommunications are also important sectors for the country. South Africa, Belgium and China are the DRC’s main investors, according to the UN Conference on Trade and Development’s (UNCTAD) 2020 World Investment Report.

From 2006, the DRC saw a steady rise in inward investment, mostly in the mining sector, which peaked between 2010 and 2012. In 2010, inflows stood at $2.9bn, decreasing steadily to a figure of $1.48bn in 2019, according to UNCTAD.

Foreign direct investment (FDI) could help to fulfil the country’s mining potential for diamonds, copper, cobalt, gold and uranium, which is largely untapped. However, FDI in the country remains in decline, with inward financial flows propped up instead by foreign personal remittances, which made up 3.59% of GDP in 2019, according to UNCTAD.

As well as the DRC’s volatile political situation, foreign investors face a poor business climate, with problems including corruption and unwieldy administrative processes. Added to this, in 2018 the country’s mining code was amended, increasing taxes and requiring a minimum 10% local ownership of any mining company operating in the country, as well as severe restrictions on the export of unprocessed minerals under a new mining permit.

Lara Williams

Lara Williams

Senior reporter

Lara Williams is a senior reporter at Investment Monitor specialising in FDI in the tech and bio-pharma sectors.